To succeed as an entrepreneur, you need to make something that people want. You may have a great idea or concept, but if people don’t want it, or enough customers don’t exist, your brilliant idea will cease to be so brilliant. But how do you find balance between the two? How do you know what people want, or if there are even enough people who want what you’re offering? And how can this be applied to the creative arts?

In the tech world, this very problem is known as “Product-Market Fit,” or PMF. It was a concept first developed by Andy Rachleff, a professor of technology entrepreneurship at Stanford Graduate School of Business. Since then, Product-Market Fit has also been written about extensively by Marc Andreessen, who co-founded Netscape and currently runs a venture capital firm in Silicon Valley. In addition, Steve Blank, who created his own scientific method for Customer Development, has written about the importance of PMF for startups.

Of course, if you’re a creative entrepreneur working outside of the tech world, this may all just sound like gibberish to you, which is why we’re taking the time to combine, condense and spread their lessons in a way that benefits actors, illustrators, fashion designers, fellow writers, and other creatives. Because even though these lessons were designed to help people creating apps and new technology, they are still unbelievably relevant for small business owners and individuals looking to make a living off of their own creations. So here we go:

Which Comes First? The Product or the Market?

The traditional wisdom is that “if you build it, they will come.” Unfortunately, outside of a Kevin Costner film, this old adage is not necessarily true. Sure, you can build the coolest, greatest, most beautiful product in the world, but if there isn’t a real desire for it in the marketplace, your offer is pretty much dead upon arrival. (Remember from our deep dive into the Long Tail: the greater the freedom of choice, the greater the inequality; therefore, you should expect fierce competition. Audiences are unlikely to flock to your offer just because it’s there.) So, which comes first - the product or the market?

Marc Andreessen highlighted an interesting discovery in his writings. He realized that the market matters more than the product and team behind it, because even if a tech company has the most amazing product and the greatest team possible, if the market they entered was terrible and the customers didn’t exist, that product would always fail. Conversely, if the team was barely competent and their product was merely acceptable, if they stumbled upon a great big market, that product would always succeed.

The market needs to be fulfilled by the first viable product that comes along. The product doesn’t have to be great; it just has to basically work. And the market doesn’t care how good the team is, as long as the team can produce that viable product.

— Mark Andreessen

Now, this doesn’t mean that you should produce low quality work in the hopes of hitting the target; but it could be seen as an excuse to take some pressure off of yourself as an artist and creative. Your first product or offer does not need to be perfect or brilliant or the next big thing. It just needs to work well enough to help you find a market.

According to Steve Blank, who created the Customer Development process, you should apply a scientific method to this quest for matching the right product to the right market. In other words, make a hypothesis or assumption, test it on paying customers, gather data, then adjust based on the results. This may take several iterations.

For example, let’s say you just created an album with your band. Your assumption is that people who enjoy the music of The Black Keys will love your album. So, you bring it to that marketplace of Black Keys lovers and test your album on them. Turns out, they weren’t in love with it. So, you adjust your marketing message and try again. You test it with Chuck Berry fans this time, and luckily enough, they are crazy about your music. Suddenly, you’ve found a potential market - but - they prefer to purchase their music on vinyl as opposed to MP3 files. So now you have to adjust to the needs of that market in order to make your offer match their desires. That could take another iteration, and so forth.

Markets that don’t exist don’t care how smart you are.

— Mark Andreessen

In summary, start with your product and follow your creative urges. Just know that the market itself will always trump your product, so be open to adjustments and changes as you iterate from a creative brainchild that you love into a quality product that people actually want. And don’t take it personally if you discover that a market doesn’t exist. You’re a creative! Just keep iterating, experimenting, and searching for what works in what market. Don’t waste your creative powers trying to make an idea valuable in one form if customers simply don’t want it. Find the need that must be fulfilled instead.

The Three Market Types Ranked from Least to Most Likely

Founders have to choose a market long before they have any idea whether they will reach Product-Market Fit.

— Chris Dixon, Partner at Andreessen Horowitz

Steve Blank broke down the available markets into three categories: new, existing, and re-segmented. Determining which of these markets you product fits within can be difficult, but it’s important to know which game you’re playing early on. For instance, each market type requires different marketing strategies, because how your customer perceives and understands your offer is instrumental in gaining traction. Let’s begin with the least likely option.

Entering a New Market

This is an extremely rare scenario even in the tech world, so don’t automatically expect this to apply to you if you’re working in the creative industries. Why? Because it requires creating something so new that customers won’t even know what it is or how to use it. And no offense, but I don’t think sculpture or painting or writing is going to be disrupted that radically after all these years, unless A.I. drastically changes the game. But what this new market label means is that you now own 100% of market share - you’ve created an entirely new market and no other comparable products exist at this point in time. The example Steve Blank offers is the automobile replacing the horse-drawn carriage. Of course, if you do find yourself in this position, know that you must educate your customers first and foremost so that they understand what your product is, how to use it, what it’s for, and how it benefits them.

Entering an Existing Market

In this scenario, which you’re more likely to experience, you’re entering an existing market with existing competitors and customers who already know what’s up. Instead of trying to educate or maintain market dominance, you’re trying to steal customers (and effectively, market share) away from the competition. Think of it as a pie. In our previous example, you had the whole pie and simply had to hold onto it. In this market type, you’re trying to steal slices from the plates of others. This means you must convince the customer to choose your option over another company’s offer. They may even have to stop using a product they already enjoy. If that’s the case, a cheaper price tag probably won’t help you. Instead, you need to offer a better customer experience, a higher quality product, or solve their problem better than anyone else. This will also help you expand the pie itself by bringing in new users, or simply those who never felt that past products truly fit their needs, style, or wants.

Entering a Re-segmented Market

These would be your price-sensitive and highly-niche customers. Most likely, you’ll be working within this market. In fact, let’s go ahead an assume that you are, simply by targeting a highly specific early adopter group to establish that “beachhead on the shores.” In this scenario, you want to attract customers who have never really purchased from your competitors, either because those products didn’t fit their needs or were outside of their price range. This also happens to be a great option if you don’t have a lot of money to invest in your business right out of the gate. Start very small in a highly niche market to not only learn more about your customer’s needs but to also build your business around them. You can learn more about why this is a valuable strategy by reading our post on the Long Tail.

Understanding Market Segments (aka Your Niche)

OK, so let’s say you’re interested in entering a re-segmented market, or that you’re willing to break down a larger market into smaller, more easily obtained groups of users. Naturally, these groups would share specific needs and reference each other for product recommendations. But don’t confuse these market segments with customer segments or industry verticals. These are merely people who share a common interest and communicate with one another, thus creating a market.

A general rule of thumb: if your customers happen to share a similar need, but they have no access to each other, then they’re in separate market segments. Why is this so important? Because you want to inspire word-of-mouth marketing, which is extremely effective at keeping costs low and spreading your message quickly. Therefore, customers within a market segment must be able to use each other as a reference; otherwise, the value of this segment shrinks significantly.

The goal here is to line up specific market segments so that you can ultimately divide and conquer. Taking one segment at a time, you can work at maximum efficiency to establish product-market fit. So find a niche market that’s perfect for your product, use it learn more about your customer, and then expand operations one segment at a time.

The term Product-Market Fit describes the moment when a startup finally finds a widespread set of customers that resonate with its product.

— Eric Ries, The Lean Startup

Alright, What is Product-Market Fit, and Why Should I Care?

Product-Market Fit means that there is a strong demand for your product within a sizable market of passionate users. Basically, it means that you're able to stay in business because there are enough people who want to buy your product. And this demand is essential if you’re ever going to gain traction in the marketplace.

Steve Blank argues that you must meet the following criteria to achieve proper PMF:

1 . The customer is willing to pay for your product.

2. The cost of acquiring that customer is less than what they pay for your product.

3. There is sufficient evidence that the market is large enough to support your business.

If you don’t have these three things, you don’t have Product-Market Fit. Why? Because you need to acquire revenue if you’re going to stay in business. If you’re paying more to acquire your customers than you’re able to earn from their purchases, you’re in trouble. If you’re spending a ton of money to grow inorganically, you’re doomed. And if you’re constantly reinventing your product with no end in sight, you’ll never achieve growth. In this case, use your early adopters to gather feedback. Find out if your customers actually see value in your offer. If they “don’t get it,” you’re either in the wrong market or have the wrong solution to that market’s problem.

If you address a market that really wants your product - if the dogs are eating the dog food - then you can screw up almost everything in the company and you will succeed. Conversely, if you’re really good at execution but the dogs don’t want to eat the food, you have no chance of winning.

— Andy Rachleff

How Do You Measure Product-Market Fit?

Product-Market Fit exists in the eye of the customer, so to measure whether or not you have it, you’ll need to turn to them. As Steve Blank argues, “what matters is having forward momentum and a tight, fact-based metrics feedback loop to hep you quickly recognize and reverse any incorrect decisions.” In short: you need metrics & data to ensure that you don’t invest too much money in scaling up your business before you’ve achieved PMF, as well as prevent you from constantly reiterating your product in the hopes of acquiring a foothold in the marketplace. So, what metrics should you track?

Here are five metrics to monitor for your website:

Bounce Rate

Time on Site

Pages per Visit

Returning Visitors

Customer Lifetime Value

Why these five? Because a low bounce rate means that a visitor’s expectations are being met, and the more time they spend on your site, the more satisfied they are with their experience. Similarly, the more pages they visit, the better you have met their needs. And if they return to your site frequently, you can assume that you’ve made a lasting impact, which can lead to profitability seen through Customer Lifetime Value.

However, there is another way to measure Product-Market Fit. Devised by Sean Ellis, the CEO & Founder of GrowthHackers, this method requires you to ask your customers as simple question. But first, who should you ask?

Ellis recommends that you survey customers who have:

Your transition towards growth as after you acquire Product-Market Fit.

Experienced the core of your product or service

Have used your product or service at least twice

Have used your product or service in the past two weeks

Try to survey at least 50 customers, if you can.

Ask them: “If you no longer had access to this product or service, would you be: very disappointed, somewhat disappointed, or not disappointed?”

If 40% of those surveyed say that they would be “very disappointed” without your product or service, then you have achieved Product-Market Fit and will most likely be able to achieve strong traction within that market. However, keep in mind that this metric indicates nothing regarding market size and is, therefore, not a guarantee of success. And just because you’ve achieved PMF at this point in time does not mean that you will always have it. Furthermore, early adopters tend to skew more favorably than early majority customers, so be sure to test early and often. Still, if you have managed to achieve PMF, that means you can begin to scale your business and actively seek growth.

Damn. I Don’t Have Product-Market Fit. Now What?

Let’s go back to our results from the Sean Ellis test. If a majority of customers surveyed said that they would not be disappointed if your product ceased to exist, you clearly have a problem, but don’t give up. Ask how your offer can be improved upon, what features should be added or removed, what they liked most and least, and dig deeper into your customer’s problem or needs in general. Because if they’re just not interested, either your solution doesn’t work for that specific issue, or your message isn’t resonating. See if there are any similarities between the people who responded so negatively to your offer. Are you simply selling to the wrong people, or must you go back to square one with your idea? Gather all the information you can, then try again. (Remember: this is an iterative process.)

On the other hand, if a majority respond with “somewhat disappointed,” you’re on slightly improved footing and that much closer to PMF. Dig deep into responses to uncover just where things have gone wrong. Ask users how you could make your offer better for them, personally. Then answer might be surprisingly simple. However, as artists, even opening ourselves up to such criticism can be extremely painful. Try to look at things objectively. You’re simply trying to match your offer to the marketplace. It means nothing about your creative skills or vision. Keep making assumptions, creating, and testing until you find what works.

Of course, outside of the Sean Ellis test, you know when you don’t have Product-Market Fit: there’s no excitement around your offer, word-of-mouth marketing is non-existent, your audience isn’t growing, and deals aren’t closing. Just keep in mind that this is a process. It’s rare that you get that a-ha! moment right away. Keep at it!

You often stumble into your Product-Market fit. Serendipity plays a role in finding Product-Market Fit, but the process to get to serendipity is incredibly consistent.

— Andy Rachleff

Finally, I Have Product-Market Fit. Now What?

Your customers love your product, it’s flying off the shelves, word-of-mouth is exploding, reporters are calling, and you can barely make enough of your product to keep up with demand. That’s when you know you have strong Product-Market Fit. However, proceed with caution. The last thing you want to do is scale too fast.

Steve Blank calls it “scaling prematurely.” Basically, it means that you're jumping head first into a larger market too soon. Remember, we’re supposed to be conquering one market segment at a time - not plunging into the deep end to see what happens.

A study by the Startup Genome argued that “startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely… In our dataset we found that 70% of startups scaled prematurely along some dimension. While this number seemed high, this may go a long way towards explaining the 90% failure rate of startups.” While you may or may not be running a startup, this is still wisdom to take to heart. Take a deep breath, then determine how you plan to achieve profitability in a strategic and efficient way. As your business grows, you want to remain profitable - not end up in the red - so seek out sustainable growth.

First to market seldom matters. Rather, first to Product-Market Fit is almost always the long-term winner. Once a company has achieved product market fit, it is extremely difficult to dislodge it, even with a better or less expensive product.

— Andy Rachleff

Once you have actually achieved Product-Market Fit, you can start climbing the steps of the pyramid as you scale your business. Just be sure that you use the information learned up to this point to devise a winning marketing message, implement an effective business model, and streamline your customer acquisition process.

But congratulations! You now have a running chance at success! Good luck!